Has Consolidated Graphics Become the Perfect Stock?

Every investor would love to stumble upon the perfect stock. But will you ever really find a stock that provides everything you could possibly want?

One thing's for sure: You'll never discover truly great investments unless you actively look for them. Let's discuss the ideal qualities of a perfect stock, then decide if Consolidated Graphics (NYS: CGX) fits the bill.

The quest for perfectionStocks that look great based on one factor may prove horrible elsewhere, making due diligence a crucial part of your investing research. The best stocks excel in many different areas, including these important factors:

Growth. Expanding businesses show healthy revenue growth. While past growth is no guarantee that revenue will keep rising, it's certainly a better sign than a stagnant top line.

Margins. Higher sales mean nothing if a company can't produce profits from them. Strong margins ensure that company can turn revenue into profit.

Balance sheet. At debt-laden companies, banks and bondholders compete with shareholders for management's attention. Companies with strong balance sheets don't have to worry about the distraction of debt.

Money-making opportunities. Return on equity helps measure how well a company is finding opportunities to turn its resources into profitable business endeavors.

Valuation. You can't afford to pay too much for even the best companies. By using normalized figures, you can see how a stock's simple earnings multiple fits into a longer-term context.

Dividends. For tangible proof of profits, a check to shareholders every three months can't be beat. Companies with solid dividends and strong commitments to increasing payouts treat shareholders well.

With those factors in mind, let's take a closer look at Consolidated Graphics.

As a commercial printing company, Consolidated Graphics provides an outsourcing solution for companies looking to turn over responsibility for printing, mailing, and related services. Unfortunately, that business has gotten extremely competitive, and several of Consolidated's peers have faced even bigger challenges. R.R. Donnelley (NAS: RRD) , which offers a wider array of business services, has seen similar revenue drops, while Quad/Graphics (NYS: QUAD) and Cenveo (NYS: CVO) have also struggled to avoid sales compression. Even Vistaprint (NAS: VPRT) , which has used an acquisition strategy to boost sales, has still had problems in its share performance.

One area where Consolidated Graphics has focused on lately is making sure it has the access to credit that it needs. Last month, the company managed to extend the maturity on its primary $285 million credit facility until mid-2017, and even negotiated for the right to tap an extra $100 million under certain circumstances.

But longer-term, one has to question the extent to which printing services will even be needed. As electronic distribution becomes more popular due to cost savings and the availability of tablet devices, commercial printers could simply fade away.

To improve, Consolidated Graphics needs to change with the times and focus more on the digital distribution side of its business. Without a strong competitive position there, the company will likely never reach perfection.

Keep searchingNo stock is a sure thing, but some stocks are a lot closer to perfect than others. By looking for the perfect stock, you'll go a long way toward improving your investing prowess and learning how to separate out the best investments from the rest.

Fool contributor Dan Caplinger doesn't own shares of the companies mentioned in this article. Motley Fool newsletter services have recommended buying shares of VistaPrint. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has a disclosure policy.